6aa35b80-339c-49de-ba58-c13b0a1aa8baIt seems that electric vehicles (EVs) are finally coming of age as barriers to take up start to fall, costs decline, and range and performance improves.

Last December Morgan Stanley upped its forecast for EV penetration to potentially 10 to 15 per cent by 2025, as car makers accelerate plans to build EVs (think of the Jaguar E-Pace) and as tightening rules on traditional ICE (internal combustion engine) cars make them uncompetitive more quickly than expected.

One indication of the latter might be seen in the huge shift away from diesels underway across Europe, where its market share has fallen by 3.6% over the last year - more on that in my next blog.

Now, a research report from Dutch investment bank ING says that the European car market could be fully electric by 2035. It states that battery electric vehicles are on the way to a "breakthrough" by 2024 as barriers to their adoption - think charging infrastructure, range anxiety and pricing - fall, especially as electric batteries become cheaper and better.

The authors of the report believe that current developments in technology could set EVs on a growth path to a 100% share of new passenger car sales in Europe by 2035, posing a "threat to the automotive industry as we know it".

Not surprisingly, though, the report highlights barriers to take up of EVs (something I've been researching with colleagues at Coventry University): limits to charging infrastructure (20%), limits to range on one charge (28%) and the high price of electric cars (40%) all being reasons cited by consumers in the report for not buying EVs.

Nevertheless, the report suggests that by 2024, the cost of ownership of a long-range EV is expected to match that of a similar ICE car in Europe's largest market, Germany.

The ING report also points to future improvements in battery cell density, meaning more energy per cell, thereby increasing range and reducing battery pack weight and cost. It also notes that battery manufacturers are working on other chemistries, such as solid state batteries, to increase energy density "by a factor of 2 to 3".

The forecast seems in line with projections by Bloomberg Energy Finance earlier this year. It noted that EVs will cost up to a quarter more to manufacture than equivalent ICE vehicles until 2020 but that battery prices are falling rapidly.

Bloomberg noted last year that Lithium-ion battery costs have dropped by 65% since 2010, reaching $350 per kWh in 2015. When the cost of battery packs falls below $200 per kWh, EVs are likely to achieve cost parity with equivalent ICE cars, suggesting a ‘tipping point' in the mid-2020s. Analysts expect EV battery costs to be well below $120 per kWh by 2030, and to fall further after that as new chemistries come into play.

But while costs are falling, there remains a need for ongoing policy support to incentivise consumers in the short to medium term (such via as subsidies to run an EV, tax breaks and so on). Withdrawing support too quickly could still stall a nascent technology.

Longer term, the travel of direction seems clear. Last week, France stated that it will end sales of ICE cars by 2040 as part of an ambitious plan to meet its targets under the Paris climate accord.

On the one hand, that 2040 deadline seems rather pointless given the technological developments taking place (rather like saying France won't be selling horses-and-carts by 2040 one analyst suggested), but equally the timescale involved is sufficiently long term enough to be taken seriously. And if enacted it would send a very clear signal to manufacturers and consumers and could accelerate a transition to EVs.

Meanwhile Norway, which has the highest penetration of electric cars in the world, has set a tentative target of only allowing sales of 100% electric or plug-in hybrid cars by 2025. Other countries have floated the idea of banning ICE cars to meet air quality and climate change goals, but have not yet passed concrete targets.

Also last week, Volvo said it would have pure EVs or hybrids across its entire range by the mid-2020s. Its sister company, the soon-to-be rebranded London Electric Vehicle Company (LEVC) also unveiled the TX electric taxi last week, to be built at its new Ansty plant near Coventry. Commercial vehicles may follow.

The Volvo move in particular was indicative of the firm anticipating a shift toward electric cars over the next decade in a big way; it wants to be at the forefront of that push. It's another signal that huge disruption and transformation is coming to the industry.

After years of false dawns, it seems that the EV market is finally sparking into life. That will offer new opportunities which our region's auto industry - and our policy makers - need to grasp.

This article was written by Professor David Bailey of Aston Business School and originally appeared in the Birmingham Post.

]]> 2017-07-25T11:29:49.000-04:009fd76cb0-ca33-4ae8-b254-602fef01972bRecently the Financial Times reported on the accelerating pace of investment in the autonomous vehicle (AV) market, after start-up Drive.ai raised $50m in new funding.

As the anticipation around the driverless vehicle market starts revving up, more and more investors are looking for a way to participate in this growth. But which is the best company to back?

Results from the second quarter of our year-long research study have revealed how investors rank the wide range of businesses involved in the autonomous vehicle (AV) market.

Broken down by manufacturers, IT giants and tech businesses, brands like Tesla, BMW, Apple and Uber have been ranked by UK investors. The investors have named which brands they have the most confidence in when it comes to developing driverless vehicles.

]]> 2017-07-11T11:19:48.000-04:00d77b2516-290f-4221-b5dc-682cb8c0196dThis week the Society of Motor Manufacturers and Traders (SMMT) chief executive Mike Hawes said: 'We accept that we are leaving the EU and we share the desire for that departure to be a success.

'But our biggest fear is that, in two years' time, we fall off a cliff edge - no deal, outside the single market and customs union and trading on inferior World Trade Organisation (WTO) terms."

It's clear that UK Automotive continues to grapple with the impact of what remains an uncertain Brexit. The long product lead-in times (often over five years from planning to production), the long product life (often five to 10 years) and highly intensive capital requirements all drive a need for medium-term certainty so that decisions made today will still make economic sense over the next 10 to 15 years.

Theresa May's government has engaged with the automotive industry to understand the sector's concerns and, notably, has been successful in persuading Nissan to build two new models at its plant in Sunderland. It is said that the decision will protect over 7,000 jobs and it was an early test of how the government would approach this sector. The letter of support written by Business Secretary, Greg Clark MP remains confidential although Mr Clark indicated that there had been no offer of financial compensation or state aid. "There's no chequebook. I don't have a chequebook", he said.

Many of the sector's worries remain at large and the EU has indicated that sector-specific trade deals will not be available. The UK's industry body (The Society of Motor Manufacturers and Traders - SMMT) has published a position paper on Brexit in which it calls on the government to prioritise the following:

Securing continued membership of the Single Market to ensure that there are no tariff or regulatory barriers to trade with the EU;

Securing continued membership of the Customs Union;

Guaranteeing unrestricted access to talent across Europe;

Creating regulatory certainty through harmonisation and future influence; and

Securing the UK's position in current EU trade deals and those under negotiation

While we think that continued Single Market membership is highly unlikely, we support the need to ensure that customs procedures do not create uncompetitive friction in the movement of goods, that talent continues to be readily available and that the regulatory environment remains harmonised.

]]> 2017-06-23T05:13:40.000-04:003728c2b1-3257-4320-876a-9c009d82fc0aJaguar Land Rover (JLR) is drawing up plans to hire an extra 5,000 engineers and technical staff in the next 12 months. That’s a major vote of confidence in the UK for developing and designing cars. The announcement could come as early as this week.

It's not clear where the workers will be based, but the recruitment drive could see the UK's biggest car maker boost its UK workforce to as many as 42,000 workers.

Last year Jaguar unveiled its first electric car, the i-Pace. The car is already in production by the contract manufacturer Magna Steyr in Austria and should hit dealers later this year, and give Tesla a run for its money. JLR hopes to design and make electric vehicles (EVs) in the UK in the future.

The firm is also competing in the Formula-E electric racing series (an electric version of F1) which is a test bed for new technologies.

The European car market is rapidly turning away from diesels in the wake of the Volkswagen crisis, with consumers spooked by fears over tighter regulations, restrictions on diesels in cities, and uncertainty over residual values of cars. The diesel market could collapse to as little as 15% of car sales in Europe by 2025, from near 50% not long ago.

Car firms like JLR are accelerating a shift into EVs and hybrids. JLR in particular has been far too slow to get into the burgeoning EV market and is now playing catch up with the likes of Tesla and BMW.

Given such shifts, and the move into autonomous and connected cars, electronics and software are increasingly key for new cars. Indeed, over half the value of a modern premium car is already in the electronics that go inside it. JLR is increasingly a tech firm that does cars.

JLR hops to recruit 1000 new software and electronic engineers. To find the new staff it needs, JLR is using an innovative recruitment process featuring the alternate reality band Gorillaz.

Potential applicants will be able to download the Gorillaz app and try to crack a code-breaking challenge. Those successful will be fast-tracked through the JLR recruitment process without the need for a CV. In so doing, JLR aims to pay more attention to skills rather than qualifications, and also attract more women.

The Telegraph quotes Alex Heslop at JLR as saying that "as the automotive industry transforms over the next decade we will have to attract the best talent and that requires a radical rethink of how we recruit… This is a way to recruit a diverse pool of talent in software and cyber systems, app development and graphics performance."

It's not clear where the 5000 new staff will be located, but many of the 1000 new software and electronic engineers are likely to be based in the Midlands given it is the centre of JLR's R&D activities with bases at Gaydon and Whitley and close links with local universities and high-tech suppliers.

The firm aims to rapidly expand production over the next few years from around 550,000 cars a year to over 1 million. The new software and electronic engineers are needed to develop the new cars that will power this growth.

Recruiting so many staff is a huge vote of confidence in the UK as a place to develop cars. JLR has to recruit the best talent no matter wherever it is - the company already has operation in Silicon Valley - and it is ready to bring the people they need here.

I expect that includes skilled engineers from the EU too - of course membership of the EU makes it easier to hire skilled staff. That's something that has to be easy as possible in the future too, a point that the government needs to note as Brexit talks start this week.

This blog was written by Aston Business School professor David Bailey and originally appeared in the Birmingham Post.

]]> 2017-06-20T04:48:54.000-04:0015a538df-0a7e-418d-995b-af0e25bbb51eLotus, famous for F1 success decades ago and James Bond’s underwater Esprit - driven by the sadly departed Roger Moore - has been taken over by the Chinese firm Geely.

The Geely holding company, which owns the carmakers Geely, Volvo and the London Taxi Company, will take a 51% stake in the struggling sports car firm, and a 49% stake in Proton, which via DRB-Hicom owns Lotus.

Lotus is essentially two companies in one: a highly successful engineering consultancy firm which has great expertise in composites and lightweight materials, and a perennially loss-making sports car maker. Lotus made a loss of £28m in the 12 months ending on in March 2016, with sales down by 240 units to just over 1500 cars.

The attraction for Geely is Lotus' lightweight technology which Geely hopes to use so as to meet emissions targets in China and Europe and the ability to produce right-hand drive models for markets in South Asia, Australia and the UK.

Daniel Donghui Li, chief financial officer of Geely holdings, was today quoted in the FT stating that "reflecting our experience accumulated through Volvo Car's revitalisation, we also aim to unleash the full potential of Lotus Cars and bring it into a new phase of development by expanding and accelerating the rolling out of new products and technologies."

It's another step on the road towards internationalisation for Geely which aims to produce some 3m cars across all of its brands by 2020. Geely will use Proton's manufacturing operations in Malaysia to try to enter new Asian markets. Proton is well known in Asia and could also offer new marketing routes for the firm.

Meanwhile, Proton itself has been struggling of late and didn't have the resources or technology to back Lotus. Last year Proton made just 150,000 cars - around what MG Rover was making in its end days - and was suffering declining market share in its home market. It was bailed out to the tune of £280m last year by the Malaysian government which told it to find an overseas partner, so as to expand its range of products and improve the quality of its cars.

Lotus has been losing money for years. Its CEO Jean-Marc Gales went 'back to basics' when he took over in 2014, axing expensive R&D programmes and concentrating on making its core products lighter and faster. The firm cut losses to £27m last year.

It cars were in effect barred from sale in the US in 2015 when they failed to meet safety regulations, but have since returned. Its Evora 400 model was unveiled at Geneva in March with a price tag of £75K in the UK.

Despite its motor-racing pedigree, Lotus has struggled over many years to transform on-track brand heritage into on-road commercial success. While owners like GM and Proton have come and gone, one thing has remained pretty constant: Lotus is a perennially loss-making car company.

The real issue is that developing a genuinely new car costs several hundred million pounds. Lotus has neither the volume to generate cash for R&D nor the prestige to charge high prices.

Not surprisingly, of late Lotus has been focusing on enhancing its current range rather than developing new models. That's OK for so long but can't continue in the medium term given that the underpinnings of its current range of cars go back to 1996.

The basic Elise starts at just £35,880, and its Exige comes in at £55,900. In total Lotus made only 1500 cars last year. In contrast Aston Martin made four times as many cars and is able to sell models for hundreds of thousands of pounds.

But even Aston can't do it on its own anymore and has got into a relationship with Daimler whereby Aston can access Mercedes AMG technology. That is helping to develop new models much more cheaply, and may over time lead to platform sharing.

Indeed, I expect over time for Aston to be acquired by Mercedes just as other premium car brands have been snapped up by bigger players (BMW has acquired Roll-Royce, VW now owns Bentley, Lamborghini and Porsche, and Tata of course owns Jaguar Land Rover).

And Lotus? The firm has urgently needed a tie-up with a big player that is willing to share technology so that Lotus can get its development costs down. Geely offers just that, and is great news for the firm.

Just one aspect of this could be the electric car technology that Geely is developing, for example via the London Taxi Company. I hope it's not too long before we see an electric Elise.

After all, the very first Tesla, the Roadster, used a lotus Elise body, and looked stunning.

This article was written by David Bailey, professor at Aston Business School.

]]> 2017-05-30T04:52:58.000-04:00222c34e7-61fa-421b-94af-63797098907bSome days, I really love my job. Take last week. We had the semi-annual meeting of our automotive group. As you might expect from a firm with such strong roots in the English Midlands, we have the largest and most highly rated specialist automotive group of lawyers in the UK.

It is always interesting when we get together, particularly when we hear from speakers such as Professor David Bailey (Aston University) and David Bell of SDB Automotive the latter scarily fascinating about the (lack of) cyber security in vehicles which are connected to the internet i.e. most of them, including large and fast lorries. Keep your distance, people. However, this meeting was particularly interesting, and indeed special, because it was held at the Castle Bromwich plant of our client Jaguar Land Rover and, of course, we got to poke around.

Now, I love visiting factories for all sorts of reasons. Here, I was in awe and wonder at the extraordinary technology on display. We saw the production line, which I am pretty sure I last saw on my previous visit some ten years ago (more on that later), and which was then state of the art but is now very much in manufacturing terms the primitive end of the operation. The power and, yes, beauty of this site are now to be found in the new pressing plant, where a handful of humans, made tiny by the vast hangar-like space around them, wander through what they describe as a "forest of robots", the machines' orange arms moving with a precision, speed and grace which would adorn the stage at Covent Garden as they fashion and sculpt from dull aluminium fabulous objects of desire.

I am aware this is a highly emotional response. It is supposed to be. An automotive engineer friend of mine told me it is harder to design cars than it is aeroplanes, because no-one has to feel anything about a Boeing or an Airbus, whereas a lump of metal with a circle of rubber at each corner has to provoke all sorts of feelings, not least of which is desire. My golly, Jaguar is good at that.

I should know. I always wanted a Jaguar. As a (very) small child in the 1970's, I might see these glorious beasts on the roads or on other people's drives and I would want them and everything they stood for: it was that or a Jensen Interceptor.

That small boy finally got his wish about ten years ago, an 'S' Type made, like my current model, at Castle Bromwich. By the time I took her there, they'd stopped making them but it didn't matter. I like driving my car back to the place it was made. I know that she is not really purring even more smoothly as I turn into the factory gates. I know "The Love Bug" was not a documentary. I know that her successor vehicle in my ownership likewise does not care either where she is and cannot change her engine tone as she drives into what is not really her 'birth' place, but I feel something nonetheless.

That is why, as a petrol-head bereft of any technical knowledge, I am so impressed by what these engineers do. I do not do a proper job, I am a lawyer. I push paper, say words; I don't make anything.

So I delight in seeing a car take shape, layer after layer, and revel in the well-rehearsed quips of the tour guide: dust is removed from the cars prior to painting by putting through rollers made of emu feathers, each roller costing £100,000 ("£10,000 for the feathers, £90,000 to catch the emus"); the water seals are tested by pumping 104,000 litres of water per minute at the vehicle ("to simulate a summer holiday in Wales"). Our guide started as an apprentice at Jaguar Cars in 1967. He would have helped build the models I saw as a little boy. Having learned that I am easily moved by metal, you will not be surprised to hear that I am equally stirred by a sense of history.

That is itself another reason why I love coming to this particular plant. It is where they built the Spitfires, that most evocative and heart-stirring piece of engineering genius. If you cannot be moved by the sound of a Merlin engine in a clear blue summer sky, have someone check your pulse. Alas, on this visit, we did not see - because it is in the paint shop and they don't let anyone in there - that part of the roof of the factory improvised from the wing of a bomber, put in place some 70 years ago and still in use today. We did, however, see the camouflage markings which remain on the brickwork of the unit on the site where they build the car I currently drive. I'd like to think that there is some DNA from the Spitfire in that vehicle but I know it's not the same thing at all, save that it is graceful, powerful, beautiful and British. That'll do.

]]> 2017-05-22T00:00:00.000-04:0047c171f2-abbe-4a54-a431-fa1dea8010e7New car registrations fell month-on-month by almost 20% to 152,076 units in April, as new Vehicle Excise Duty (VED) rates came into force and imported car prices rose.

New VED rates, which came into effect on 1 April 2017, introduced a flat-rate of £140 for all petrol and diesel vehicles after the first year, compared to the CO2-based system used previously.

The new VED rates effectively pulled forward car registrations in March, which were up 8% year-on-year, before slumping in April. Most buyers would have been about £400 better off over three years by buying a low-emission car before the VED rate hike.

While electric cars continue to be tax-free, lower-emission models, including hybrids and plug-in hybrids, will pay between £10 and £100 in first-year excise duty after previously being exempt. This has triggered the first downturn in alternatively-fuelled car registrations in nearly four years, with registrations down 1.3% compared to April 2016.

Private sales slumped, with registrations by private buyers down by 28%. Businesses and large fleets also registered fewer cars, down 21% and 12% respectively.

Despite the big hit in April, the Society of Motor Manufacturers and Traders (SMMT) said that the overall new car market remains 'strong', with registrations over the first four months of 2017 up 1.1% compared to 2016.

Yet the 20% drop surprised many, and it represented a significant hit for a market which has boomed in recent years on the back of new models and financial innovation in the form of Personal Contract Plans (PCPs).

Diesel cars took the biggest hit, with wider concerns over possible higher duties going forward and tighter restrictions in the wake of the Dieselgate scandal.

It wasn't just the new VED rates that acted as a drag on the market, though. Imported car prices have been rising on the back of the Brexit induced depreciation of sterling last year. With real wages being squeezed by a wider pick-up in inflation, households may start to hold off on new car purchase, a traditional cyclical 'big ticket' item.

Car sales have been a boost for the UK's economy since 2014. Low petrol prices and attractive financing deals have boosted sales which in turn has helped economic growth in the UK.

A softening economy, falling consumer confidence, rising prices, muted earnings growth and possible weakening labour market are likely to mean a slowdown in car sales in 2017, with consumers likely to delay purchases or trade down to cheaper models.

The SMMT itself said late last year that 2017 would likely see sales down by 5-6% compared to 2016. That is anyway optimistic - I see sales dropping by 5-10% this year (even a 10% fall would still see sales at historically high levels).

Signs of stress appeared in the market late last year, with so-called 'pre-registered' sales rising - as far as I can tell, to 10-15% of all car registrations by the last quarter of the year.

These arise where dealers don't actually sell cars to real customers but register the cars themselves so as to hit sales targets and qualify for bonuses from manufacturers. Pre-registrations have always been around but the levels observed indicate that the market is if anything 'overtrading'.

I also expect sales to fall through 2017 as the credit-fuelled new car sales boom reaches the end of the road. Over 75% of UK new car sales are financed by lenders and cheap credit has driven sales, particularly via PCP financing schemes.

Under a PCP, drivers pay an initial deposit and then a fixed monthly payment over a term of – say - three years which in effect covers the depreciation in the car's value.

After the three years are up, the driver then has the option to make a 'balloon payment' to take ownership of the car, or, as manufacturers hope, trade in the residual value in the car as a deposit on a new vehicle.

The key difference comparing PCP as against a traditional Hire Purchase deal is that the driver is paying off a much smaller amount of money, so s/he has a lower monthly payment or lower initial deposit or shorter repayment term.

So on a new car deal over three years with a low deposit, a PCP offers a much lower monthly payment than an HP, with the caveat that at the end of the agreement the outstanding balance will need to be settled.

All this is a way of saying that on PCP the same car will cost considerably less per month to finance than on an HP, or can mean that the driver can drive a more expensive car for the same monthly payment. That's what has made PCP so attractive to the car 'buyer' (and has helped the growth of the premium sector).

And while PCPs have kept the corks popping at dealer sales events, dark clouds may be looming on the horizon which may dent to the ability of PCP to keep cars coming out of the showrooms at quite such a dizzy rate: used car values and a likely slowdown in growth.

In effect, the surge in PCP-propelled new car sales may lead to a wave of used cars hitting the second-hand car market, in turn depressing second hand values (unless broader economic growth is fast enough to boost confidence and used car sales).

That in turn could impact on the very collateral that lenders rely on to make PCP deals work. If so, car firms may take a hit on the value of used cars being returned, and PCP rates may start be less attractive in the future. That in turn will act as a drag on the market.

So 2017 will likely see a slowdown in car sales. March's bumper sales figures could have been a 'last hurrah' for the market before dark clouds set in.

This article was written by Professor David Bailey from the Aston Business School in Birmingham and originially appeared in the Birmingham Post in May 2017.

]]> 2017-05-09T06:56:45.000-04:00e47fe0eb-5819-46ec-9f09-93965c300a78A report released today by The House of Lords Science and Technology Committee has warned that the UK risks missing out on the benefits of driverless vehicles unless urgent government action is taken. The report proposes a range of measures that are designed to broaden the current focus so that work on connected and autonomous vehicles is effective across a number of sectors and not just focused on road vehicles.

The report, Connected and Autonomous Vehicles: The future? establishes key recommendations surrounding policy as well as investment decisions that should enable the UK to maximise the economic benefits of autonomous vehicles. This includes the establishment of a robotics and autonomous systems (RAS) leadership council to ensure that knowledge and activity is shared across multiple sectors, as well as the improvement of mobile networks to better enable machine to machine (M2M) connectivity and data sharing, both crucial aspects of the driverless experience. The report also states that while guidance on and implementation of strategy should be a governmental priority, state funding should be limited in order to encourage cross-sector investment, especially from technology-based organisations.

The Committee highlighted the need for new road and communications infrastructure. An ideal situation would of course be to redesign the infrastructure of the UK's towns and cities in a way that incorporates the technological capabilities that allow autonomous vehicles (AVs) to operate safely. However, in the absence of a bottomless budget to enhance the country's physical infrastructure, technology will need to be developed to fill the gap, for example by improving in-built components for AVs such as cameras, sensor chips, in-car networking, roadway mapping and machine learning so that autonomous vehicles are less reliant on the built environment. Indeed, just this week, technology giant Intel has purchased an Israeli driverless-car technology firm called Mobileye for $15.3bn, signalling another technology company's clear commitment to the commercial opportunities represented by AVs.

The introduction of a leadership council with the primary objective of developing strategy for the implementation of AVs actually fits with our earlier recommendations that a regulatory framework designed specifically for the needs of AVs needs to be urgently developed. The current governmental approach - which is cautious and focused on taking one step at a time where regulation and the development of technology is concerned - is of benefit where budgets are limited and the technology is new. However, there is a risk that the regulatory agenda is set by the commercial players in the market and by their speed to market rather than by UK Government and its wider social agenda. This is important because where AVs are concerned there are clear ethical issues relating to safety, mobility and sustainability that have to be addressed within the core foundations of the industry's development - and this can only come from robust regulation. While the leadership council is the right tool with which to facilitate this, there is a vital need for the support of an independent regulator in order to qualify the robustness of any legislation that is developed which we recommended in our 2016 report The Moral Algorithm. Relying on existing legislation just isn't feasible where AVs are concerned: for example the existing GDPR data protection legislation relies heavily on the consent of the consumer which is not adequate in practical terms. For example, were this to apply to the operation of a driverless vehicle, an individual would need to indicate a range of individual preferences before starting any journey. That in itself may discourage take-up and thus delay or even prevent the achievement of the safety benefits of AVs.

To date, there has been a major focus on consumer concerns around AVs and acceptance issues. The Gateway Consortium has implemented an £8m project in Greenwich will trial a series of different use cases for automated vehicle with the aim of better understanding public perception, reaction and engagement with the vehicles. It is hoped that the trials will help introduce automated transport more widely. UK Autodrive is also in the process of compiling a report that looks closely at how to address these perceptions while KPMG produced a 2015 report in conjunction with the SMMT that looked at the potential economic opportunities of AVs. Finally, Gowling WLG has taken a look at the potential investment opportunities for driverless vehicles by surveying 1000 UK investors about their appetite for getting involved in the sector, as well as when they see AVs realistically being on our roads. Although almost two-thirds see this being within the next ten years and 10% are already investing in the sector, an overwhelming majority (70%) require more information in order to make an informed decision - thereby echoing the need for robust regulation and guidance.

Overall, the publication of this report marks another positive step for the future of AVs in the UK and it is reassuring to see that the government takes seriously the urgent need for a tailored regulatory framework that properly protects the ethical as well as commercial aspects of making driverless vehicles a reality.

]]> 2017-03-15T08:40:13.000-04:0007ac0a67-8474-4746-9693-b6585b7a6b4dStuart Young refers to some detailed research and the reality behind driverless vehicles and looks at ways of regulating moral programming in order to move forward in this area.

Our cars are set to change dramatically in the coming years. Autonomous and connected vehicles will be the future of personal travel. They promise better mobility for all, reduced congestion, an improved environment and, perhaps most importantly, increased safety.

The large majority of road traffic accidents are caused when a driver makes the wrong choice. Autonomous vehicles (AVs) may never attain a flawless safety record, but by removing the driver from the decision-making process they will remove the source of most errors and therefore significantly improve safety i.e. remove the human, remove the risk.

Yet, before we begin to delegate such decision-making to autonomous vehicles we need to ask what decisions they can reasonably make and on what basis.

The technology within AVs will use an algorithm to make sure damage to both machine and human is minimised. Academics and the press have referred to this type of mathematical solution to ethical decision-making as the 'moral algorithm'.

As part of UK Autodrive (the largest of three separate consortia that are currently trialling automated vehicle technology), my firm is contributing to the thinking on societal and legal issues around the development of autonomous vehicles by developing a series of white papers. This article summarises the content of the latest in the series on 'The Moral Algorithm'.

The reality of creating a moral algorithm

Research suggests that while academic debates on the moral algorithm may be intellectually stimulating, they run ahead of the technology being programmed into today's AVs.

This sentiment is echoed by members of the UK Autodrive consortium, who stress that not only is it technologically impossible to programme an algorithm with an infinite number of moral values, but that it is not something any government would ever sign up to. Unless the social norms of society completely change, no minister is going to stand up in Parliament and say it is better to kill one person over another.

'The trolley problem' and why it's overstated

Thus far, consideration of the moral algorithm has tended to be focused on the 'trolley problem'. The trolley problem is a thought experiment in ethics which says:

"There is a runaway trolley racing down the railway tracks. Ahead of it there are two people who are tied to the tracks and unable to move. If nothing else happens, they will be killed. However, you are standing in the signal box next to a lever that will switch the trolley to a side track. On the side track is one person, who also cannot move. Will you take responsibility for pulling the lever that will kill that one person, or do nothing and allow the two to die?"

In the world of autonomous vehicles, it might be rephrased in this way:

The trolley problem in an AV world:

There is an AV driving down the road. Someone else pulls into the road unexpectedly. The AV does not have the necessary stopping distance available to pull up safely, so has to steer to one side or the other.

On one pavement is an 80-year-old woman, on the other is a group of children. Which party does the AV choose to put at risk?

Beyond the trolley problem

Although 'the trolley problem' grabs headlines when discussing the moral values of driverless vehicles, AVs will potentially have much wider scope for decision-making.

As drivers operating in this complex environment the decisions we make on the road are reflective of each of us as individuals. Currently, you drive your own car in your own way - driving is seen as an extension of your independence and personality.

Therefore, it will be important to widen thinking about the moral algorithm to encompass the many lesser decisions that we make as part of a journey.

For example, AVs will need to decide whether to enter an area marked with chevrons and bordered by a solid white line in order to pass a parked car, or break the speed limit to get out of the way of an ambulance. These sorts of actions involve breaking road traffic laws in the interests of a greater good such as keeping traffic flowing or giving priority to emergency vehicles.

The moral algorithm will also need to be capable of dealing with countless situations which do not entail a breach of the rules of the road, but do concern the interaction of vehicles with others using the same congested road space.

These are currently matters of driver choice, and are reflected in different driving styles on the road - including, for instance, how aggressively a vehicle accelerates or brakes, how sharply it changes lanes or performs other manoeuvres, how much room it allows to other vehicles to do the same things, and so on.

These are moral questions because they concern where drivers choose to place themselves on a spectrum between the pure maximisation of self-interest (getting from A to B as quickly as possible) and an altruistic deferral to the interests of other road users. In practice, the same individual may well adopt a mix of styles, or drive differently on different days as mood or circumstances dictate.

AVs will, however, need to be programmed to deal consistently with these real world driving issues. Examples of good practice include 'zip-fastener' merging of slow traffic, taking turns where traffic lights have failed at an intersection, giving way to other vehicles emerging from side roads, stopping at zebra crossings, slowing down for horses and allowing room to cyclists when overtaking.

And they will need to do this in a considerably more complex environment, as they will be required to drive on busy roads and interact with other cars (some manual, some autonomous), road users (such as cyclists) and pedestrians.

Levels of autonomy

Level 0 - Driver only

Driver is responsible for the vehicle. Controls lateral and longitudinal movement at all times.

Level 1 - Driver assistance

Driver is responsible for the vehicle. Controls lateral and longitudinal movement at all times. However, the system can support lateral OR longitudinal control.

Level 2 - Advanced driver assistance

Driver is responsible for the vehicle. Controls lateral and longitudinal movement. May hand some control over to the system. Must actively monitor system performance and retake full control where necessary.

Level 3 - Advanced driver assistance

Driver is responsible for the vehicle. Controls lateral and longitudinal movement. Can hand full control to the system. Must actively monitor system performance, retaking control as necessary.

Level 4 - Highly automated

Driver is only responsible, and exercises control, outside of specific use cases where the car is able to self-drive.

Level 5 - Fully automated

System can control lateral AND longitudinal movement in all use cases. Driver intervention is not needed

There are generally recognised to be six steps to full autonomy, all of which progressively increase safety.

There are already countless examples of vehicles with some element of automation already on the road, such as self-parking or adaptive cruise control.

In spite of this, conventional cars will also be around for many decades, so AVs will have to be able to co-exist with them. It is possible that there could be separate roads or lanes for AVs, but this option would be costly and in many places unrealistic. So the ideal solution is for AVs to be able to share the road with their less 'intelligent' ancestors.

So, knowing that AVs will be sharing the roads with conventional vehicles for many years ahead, on what basis should a set of moral values be programmed into a vehicle? Should we give greater priority to consistency, or should we reflect the individual preferences of travellers in that vehicle, to the extent that the technology is capable of doing so?

Personal safety is paramount

Those involved in AV development agree that it is almost impossible to conceive of a transport system with a 100% safety record.

Yet, if the principal selling point of AVs is their contribution to increases in safety, the level of risk we are willing to accept may actually be quite low.

In a survey, researchers found that people wanted to drive around in vehicles that would protect them and their family at all costs and did not approve of regulation that would compromise the safety of passengers in order to minimise casualties on the part of other road users.

The researchers concluded that regulation that enforced a purely utilitarian moral algorithm would delay the uptake of AVs to such an extent that "lives saved by making AVs utilitarian may be outnumbered by the deaths caused by delaying the adoption of AVs altogether".

Ultimately, given the safety imperative, the policy goal must be to encourage the take-up of as many AVs as possible, as quickly as possible. This requires co-ordination at state level, consistency, and a clear legal framework which facilitates and encourages AV technology.

Co-operation is key

AVs not only make demands on car manufacturers' research and development teams, but also on the way their retail arms sell the end product. Progress and take-up will be improved if manufacturers work together.

If all the stakeholders in the AV market really believe that automation will equal a safer, more ethical transport system, then they will have to find a way to work together to achieve this, while protecting and developing their perceived unique selling points.

Regulation

Although the industry may be improving co-operation, this by itself is not enough. The safety imperative points to a need for state regulation to facilitate and encourage the take-up of AVs by regulating the moral algorithm rather than assuming a form of informal self-regulation by manufacturers.

In order to achieve the economic, mobility and safety benefits of AVs, there needs to be a new and appropriate legal and regulatory framework that is specifically designed for the purpose. Regulation needs to lay a clear path so that existing and new participants in the market can safely move forward, literally and metaphorically, by securing public trust and ensuring that AV manufacturers are not working at legal risk. Regulation will need to balance the potentially competing factors of adherence to the law, safety and maximising take-up.

Our experts all believe that the current lack of bespoke regulation leaves the industry in a state of limbo.

In a recent consultation on proposals to support advanced driver assistance systems and automated vehicles, the government stated that it would "continue to regulate in a rolling programme of reform. This will help to facilitate the introduction of innovative new technologies in a safe, agile and evidence-based manner for the benefit of UK consumers and business."

Doubt delays development

Research shows that waiting for a shift in public opinion in order to at least set the boundaries for a regulatory regime could damage the progress of AV development.

It is therefore important not to let the trolley problem monopolise the debate regarding the moral algorithm. The trolley problem is a distraction from the much larger category of day-to-day moral decisions and the need to develop solutions to them.

There are numerous other hurdles to jump, including problems with liability, cyber-security and public trust. It is particularly in the area of public trust where the car industry and governments around the world must start a conversation that coalesces differing moral and ethical standpoints.

That is why 'A programme of public education and consultation' is one of several areas for consideration suggested in our recent white paper.

Other suggestions include:

The formulation of a coherent plan for allocating regulatory responsibility for AVs, and in particular the moral algorithms that govern their behaviour.

Consideration of how regulation - which ultimately requires the oversight of both vehicle and road network regulation in an integrated way - can best be implemented across the various tiers of UK government including the devolved administrations.

The creation of a legal framework that is sufficiently flexible and responsive to be able to make swift decisions about new technology as it is developed, within a clear decision-making framework

As part of the development of the legal framework, co-operation with the relevant international bodies to assist in the development of international standards for AVs.

Consideration of how co-operation between sector participants can best be facilitated (or required where necessary) to ensure that AV development takes place as rapidly as possible and that connected vehicles (CVs) and AVs can interact with each other.

The formulation of a coherent short, medium and long term plan regarding the deployment of AVs on public roads in the UK,

Development of a policy regarding how the moral algorithm will operate in terms of major safety situations.

Given the technical challenges of connected and autonomous vehicles, it is important that, before all of these recommendations are implemented, the first step is to realise that regulatory decisions need to be taken, and they need to be taken soon.

This article was originally published in Computers & Law magazine in February 2017.

]]> 2017-03-13T00:00:00.000-04:006cb3a206-b00a-4cd5-8d79-9077d99906e9If you've opened a newspaper or been on social media in the last few months you'd be forgiven for thinking that we are in the midst of a wave of industrial action not seen since the "bad old days" of the 70s.

However, despite the high profile disruption caused by the Southern Rail and Tube strikes (among others), the influence on UK business once enjoyed by trade unions has been in serial decline for decades. Figures from the Office for National Statistics (ONS) show that while in 1979 more than 29 million working days were lost to strikes, fast forward to 2016 and the figure is reduced by over 98% to only 322,000. This pattern of diminished trade union influence is reflected in declining trade union membership, down from 13.2 million in 1979 to less than half, 6.2 million, by 2015.

This fall in trade union membership has affected the automotive industry, no stranger to industrial action. According to the ONS, more than half of employees in the car manufacturing industry were members of a trade union in 1995, but this fell to just below 30% in 2015.

But a number of recent cases show that unions are still making their presence felt and are prepared to resort to legal challenges where they feel their collective bargaining rights are being undermined.

When is a Christmas bonus not *really* a Christmas bonus?

Dunkley & Others v Kostal UK Ltd is an employment tribunal decision only, so is not binding on other tribunals. However it is cautionary guidance for employers seeking to agree new terms and conditions directly with employees where a collective bargaining agreement is already in place.

Under section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 ("TULRCA") employers are prohibited from making offers to employees with the sole or main purpose of undermining collective bargaining by the union (the prohibited result). If a complaint is upheld for breach of s. 145B, the award is £3,830 per member (rising to £3,907 from 6 April 2017) receiving the offer and if anyone is dismissed for not accepting it, their dismissal is automatically unfair. Given these situations generally arise in collective situations involving a group of employees, the sums involved can quickly add up.

Mr Dunkley and colleagues were shop floor workers producing components for the automotive industry. In late 2015 their union, Unite, only recently recognised by Kostal, wrote to the company to start pay negotiations. Following a series of meetings, Kostal proposed a 2% increase in basic pay payable from the beginning of January 2016, a bonus of 2% of pay to be paid as a lump sum in December 2015, and for any employee earning less than £20,000 a further 2% increase in salary from April 2016. In return for this offer Kostal wanted to make a number of changes to employees' terms and conditions, including reducing the Sunday overtime rate from double time to time and a half. Kostal told the union that if the deal was rejected and the Christmas bonus wasn't paid in December it would be lost.

The union took the issue to its members on a free ballot, which saw 78% of those voting reject the offer.

Disappointed by this rejection Kostal wrote to its employees in December, including its 57 trade union members, making the same offer to each individually and noting that if they did not accept by 18 December 2015, they would get no Christmas bonus and no pay increase that year ("the First Offer").

Later in December Kostal issued a general notice, saying 77% of employees had accepted the offer, among them trade union representatives and members, and reminding staff that they would not receive their Christmas bonus if they hadn't accepted by 18 December.

On 29 January 2016 the company wrote again to those employees who had not accepted the pay offer, making a similar offer to the First Offer but without the Christmas bonus. Instead the pay offer was to be backdated to January 2016 subject to acceptance of the changes to the employees' terms and conditions ("the Second Offer"). The letter cautioned that in the event that no agreement was reached by 4 February, the employee could be served notice to terminate employment. There was no mention of subsequent re-engagement as would be normal in a dismissal and re-engagement process to bring in changes to terms and conditions, although the tribunal found that this was intended.

A mandate "blown away"

The tribunal had to decide whether either the First or Second Offers (or both) constituted unlawful inducements under TULRCA. Kostal argued that there could be no breach of TULRCA as it did not intend to cease collective bargaining on a permanent basis. Its purpose in making the First Offer had simply been to ensure that staff received their Christmas bonus. No such reason was given for the Second Offer.

The union argued that its mandate had been "blown away" by the actions of the company.

The tribunal agreed with the union, finding both offers had the prohibited result if accepted of undermining collective bargaining. The fact that a later pay agreement was collectively bargained did not mean that the company could drop in and out of the collective process as and when suited its purpose.

The tribunal rejected the company's contention that the First Offer was made to ensure employees would receive their Christmas bonus, finding the bonus to be a bargaining tool which could in fact have been paid in December or January - there was no December deadline. The tribunal held that the Company's true intentions could be gleaned from its publication of the percentage of employees who had accepted the offer "including trade union representatives and members". The company had taken a conscious decision to bypass negotiations and contact with the union in favour of a direct and conditional offer to employees who were members of that union.

An improbable impasse

At first glance the decision in Dunkley would appear at odds with the decision in Wyer v Pembrokeshire County Council, an earlier employment tribunal decision. In Wyer the tribunal held that where an impasse with a union had been reached it was possible to seek agreement directly from the employees without breaching s.145 TULRCA. However, unlike in Dunkley the sole or main purpose of the Council in making an offer was not to undermine collective bargaining but to use the established dismissal and re-engagement route to implement a new grading structure aimed at minimising equal pay risks. The direct approach to staff was made only after years of negotiations with the union had reached an impasse. In Dunkley the negotiations were relatively short lived and so could not be truly said to have reached an impasse.

As a result an employer seeking agreement directly with employees will need to establish that its "main purpose" is a credible business reason and that it has genuinely reached an impasse after collective consultation with the relevant union.

A contractual flight of fancy

In British Airline Pilots Association v Jet2.Com Limited, the Court of Appeal had to decide on the scope of those matters subject to collective bargaining under TURLCA as a result of compulsory union recognition.

BALPA secured recognition in respect of flight deck pilots by Jet2.Com follow an application for compulsory recognition to the Central Arbitration Committee ("CAC"). Under the statutory regime BALPA was granted negotiating rights in respect of "pay, hours and holidays" and as they could not agree the method of collective bargaining with the airline, the CAC prescribed the method to be used, namely the Specified Method. This meant the airline could not vary the contractual terms affecting the pay, hours or holiday of workers in the bargaining unit unless it had first discussed those issues with BALPA.

The question for the Court of Appeal was the extent to which pilots' rostering arrangements fell within "pay, hours and holidays".

The airline argued they did not as rostering arrangements did not relate to pay, hours or holidays. It argued that negotiations with BALPA should be limited to those proposals which, if accepted, would confer specific contractual rights on individuals. Rostering arrangements were not "apt for incorporation" into their contracts of employment as the needs of the business meant that they could not be set in stone.

BALPA argued that it was irrelevant whether the matters that BALPA wished to negotiate on were apt for incorporation - this was not a limitation on the scope of collective bargaining following compulsory recognition. The Court of Appeal agreed with BALPA. There is nothing in the phrase "negotiations related to pay, hours and holidays" which limited the effect of the legislation to proposals that would give rise to individual contractual rights. Procedures, processes and managerial discretion could all impact the obligations and rights of workers - it was not solely a matter of contract.

The Court of Appeal concluded that a range of the airline's rostering proposals fell within matters "related to pay, hours and holidays" including the frequency with which rosters were published and the form they took, the minimum days off that a pilot should have, standby arrangements, arrangements for night duties and rest breaks, and procedures for booking leave. Those matters were therefore subject to negotiation, albeit there is no obligation for employers to agree to particular proposals put forward.

Not so sweetheart union?

The final recent case is a Court of Appeal decision which went against the union bringing the claim. But this could be a short-lived victory for the employer.

The Pharmacists' Defence Association Union (PDAU) was planning to seek compulsory recognition from Boots. However before the PDAU made its application to the CAC, Boots entered into a voluntary recognition agreement with the Boots Pharmacists Association. This was a non-independent union, and although the recognition agreed by Boots was extremely limited, the arrangement blocked the PDAU's application to the CAC for compulsory recognition, on the basis there was a pre-existing recognition agreement in place.

The PDAU challenged the legality of this arrangement, arguing that the blocking procedure was a breach of Article 11 of the European Convention on Human Rights, namely the right to form and join trade unions. The CA found there was no breach because TULRCA also contains a statutory scheme to procure de-recognition, which the PDAU could have used, albeit they would have to have done so via an affected worker, as there is no free-standing right for a union to implement that scheme. If the PDAU could not find a worker willing to use that statutory scheme, it would indicate that the PDAU had no more support than the recognised union, in any event.

Turning up the heat on industrial action?

These cases show an increased willingness by unions to bring legal challenges to enforce their collective bargaining rights, and in the first two cases, a willingness of the courts to uphold those rights. In what may end up being an own goal by the government, this increased union activity may about to be given a boost by six new regulations which bring into force the majority of the Trade Union Act 2016 on March 1 2017. Key provisions of the Act include a requirement for a minimum 50% turnout of those entitled to vote in ballots and a six month time limit for industrial action supported by a ballot. There are also more stringent requirements around picketing and employers will get 14 days rather than seven days' notice of industrial action, so more time to try to resolve disputes and put in place contingency plans.

While designed to constrain industrial action, the effect may be the opposite. One unintended consequence of the increased need for turnout could be that unions will feel they have to turn up the heat on disputes in order to garner the necessary support. Disputes which could have been resolved amicably may be escalated as a result, leading to more entrenched positions and disruption than might otherwise be the case. Add to the mix reports that inflation will cause a fall in real wages in 2017, the uncertainty of Brexit, the rise in the gig economy, and a political backlash against the "elite", and we may be seeing the first stirrings of a union revival.

]]> 2017-03-01T00:00:00.000-05:0027e19eb0-6775-4ee3-a753-2b418e11f379The FCA has published guidance on the requirement to serve a default notice before a creditor enforces a guarantee or indemnity following breach of an agreement. Greg Standing, partner and head of the retail and finance automotive sector group at Gowling WLG, analyses the key points.

In January 2017, the FCA published guidance on its interpretation of the requirement in Section 87 (S87) of the Consumer Credit Act 1974 (CCA) to serve a default notice before a creditor enforces a guarantee or indemnity following breach of a regulated credit or hire agreement.

The guarantee or indemnity will have been given by an individual (or partnership) other than the borrower or hirer.

The guidance is around what constitutes 'enforcement' of a guarantee and takes account of comments received on draft guidance issued in 2016.

The FCA's guidance is that a guarantee is enforced not just when a court order is obtained, but also when, following breach of the regulated agreement by the borrower, the lender demands payment by the guarantor, or takes payment from the guarantor by using a continuous payment authority (CPA) or direct debit mandate that was previously provided, without appropriate prior notification to the guarantor.

However, a guarantee is not enforced if payment is made voluntarily by the guarantor following notification of the breach by the borrower and without any element of compulsion being present, or the lender requests payment by the guarantor but makes it clear that it is not thereby demanding payment.

The FCA's view is that the exercise of the CPA/direct debit without appropriate prior notice is sufficiently coercive as to constitute enforcement under S87, as the guarantor does not know when payment may be taken, or the amount.

However, where the guarantor is appropriately pre-notified before payment is taken under the CPA, the guidance is such that this would not be sufficiently coercive to constitute enforcement, as the guarantor has the opportunity to object or to cancel the CPA/direct debit to avoid payment being taken.

The guidance provides that the FCA expects a lender to clearly inform the guarantor of:

The nature and extent of the borrower's breach of the regulated agreement,

The amount of the overdue payment(s) and the lender's intention to take payment from the guarantor using the CPA/direct debit,

The likely timing of those payment(s),

The guarantor's right to cancel the CPA/direct debit, but making it clear that that will not extinguish the guarantor's obligations under the guarantee.

The guarantor should have a reasonable period to respond to the notification, which the FCA expects to be at least five working days following notification.

If no response or CPA/direct debit cancellation takes place within that period, the FCA would not regard the subsequent use of the CPA/direct debit facility as 'enforcement' of security requiring a default notice in accordance with S87 of the CCA.

This article originally appeared in Motor Finance in February 2017.

]]> 2017-02-27T12:24:49.000-05:005c4da82e-4f56-469c-888b-96ef47c6410fThe new UK government under prime minister Theresa May has brought with it a welcome change of tone on industrial strategy.

We have now heard more about what the government actually intends to do. A proposal has set out ways the government can provide support to businesses, including an effort to address regulatory barriers, to agree trade deals and help to establish institutions that encourage innovation and skills development.

This accompanies government plans to boost STEM (science, technology, engineering and maths) skills, digital skills and numeracy, including extending specialist maths schools, with £170m to be invested in creating new "institutes of technology". So far, so good. But does it go far enough?

Manufacturing weakness

The coalition government under David Cameron had a patchy record on industrial strategy. The then-chancellor George Osborne made promising noises about rebalancing the economy and a "march of the makers", but much was empty rhetoric. Some support was made available to rebuilding the UK's fractured supply chains and to encouraging rebalancing, but the sums on offer were small and failed to match the scale of Osborne's hot air.

Indeed, the manufacturing recovery since the financial crisis has been weak, characterised by concerns over low levels of investment spending, the impact of high energy costs across the sector, and issues of skills and access to finance down the supply chain.

The last government fumbled regional development strategy and offered meagre funding. And it also made no attempt to address the UK's lax takeover rules, which unlike in other countries do very little to protect strategically important businesses from foreign predators.

On the positive side, we did get a series of so-called "Catapults", where businesses, engineers and scientists work together on late-stage research and development. These retain much political support, but they need to be better funded, with a long-term commitment from government. Equally encouraging has been the work of the Automotive Council, which started under Labour and which developed under Vince Cable into an effective body in fostering public-private cooperation.

Modern industrial policy in other countries is often seen as a process of knowledge discovery, and the Automotive Council shows that the UK can operate in this way, too. It sets out clear priorities for technologies that need to be developed, securing government support which has underpinned business confidence and investment. The Council had been backed up by modest government interventions to boost skills, rebuild supply chains, and encourage investment in the industry, all of which were scrapped under Javid's tenure.

Choppy waters

Now comes a chance to start righting the ship. May's industrial strategy brings with it a new "place-based" focus which could be crucial in making a national sectoral or technology policy work effectively by enabling it to be better tailored to the needs of regions and places.

A strategy also needs an institutional anchor. Let's hope that the government looks again at the Local Enterprise Partnerships (LEPs) and returns to development bodies that can intervene more widely and strategically in ways that make sense at a regional level.

There is also much more that the government could be doing if it really wants to "rebalance" the economy. We should be stimulating investment in manufacturing through enhanced capital allowances, by resurrecting something like the Advanced Manufacturing Supply Chain Initiative (preferably on a much wider scale), and by plugging funding gaps for small firms in the supply chain.

It will be crucial, too, to do something about UK takeover rules to put the country on a level playing field with many of its main competitors. More broadly, there is a strong case for UK industrial strategy to be afforded an institutional status similar to both UK monetary and fiscal policies. At the very least, it should be the subject of regular strategic long-term reviews. By giving it that sort of priority, the new government would send out the kind of powerful message that British industry badly needs to hear.

Despite some frequent missteps, from New Labour to post-crisis austerity, there has remained a modest element of continuity in industrial policy. Quite how far the new strategy will go in building on this will be a key question. On a positive note, the new business secretary is perhaps unique in government in bringing with him a welcome devolving instinct that offers the possibility to join up sectoral policy at the national level with that "place-based" policy at the regional level.

Let's hope the new government really is more serious about the need to rebalance the economy than the last one. More rhetoric about the "march of the makers" won't be enough, especially in a post-Brexit economy.

This article was written by Professor David Bailey and originally published in Economia on 25 January 2017.

]]> 2017-02-13T00:00:00.000-05:00186ba874-15c2-4c52-b9da-a0023eeeca07The government recently responded to a consultation on driverless cars. Stuart Young, partner at Gowling WLG, explains the scope of the consultation and considers the government response.

Original news

A new study has shown that driverless cars could significantly reduce delays in the future, the Department for Transport (DfT)

DfT has reported. DfT found that delays and traffic flow improved as the proportion of automated vehicles (AVs) increased above specific levels. Alongside this study, the government has also published its response to a consultation on insurance for driverless cars.

What areas did the initial consultation cover?

The Department for Transport (DfT) and the Centre for Connected and Autonomous Vehicles (CCAV) carried out a consultation on proposals for advanced driver assistance systems (ADAS) and automated vehicle technologies (AVT) from 11 July 2016 to 9 September 2016. There were 428 responses from individuals and organisations. Among the organisational responses were different entities including insurance bodies, law firms, road safety groups, manufacturers and automotive representative groups.

The government proposals covered three related but distinct areas:

regulatory reform-clarifying the general approach to regulatory reform by suggesting a rolling programme of reform to support the introduction of near to market ADAS and AVT

insurance-making amendments to primary legislation (such as the Road Traffic Act 1988 (RTA 1988)) to extend compulsory insurance for autonomous vehicles (AVs) to include product liability, alongside more detailed insurance proposals concerning manufacturer's defences to product liability, unforeseeable defects (the 'state of the art' defence), public sector liability and liability in cases of hacking, and

Highway Code-providing guidance for drivers about the safe and appropriate use of new ADAS features including remote parking, motorway autopilot and separation distances for vehicles driving in platoon

On 6 January 2017, the DfT issued the government response, covered in more detail below.

What was the government's decision?

The response largely restated the government's initial proposals which received broad support. The government did make a change to its view on the compulsory motor insurance framework in the light of feedback from the automotive and insurance industries and law firms.

Looking at each consultation area in turn:

regulatory reform-there was support for a rolling programme of reform with a focus on near to market technologies. The DfT stated that this would help to facilitate the introduction of innovative technologies in a safe, agile and evidence-based manner for the benefit of UK consumers and businesses

insurance-the DfT changed its recommendation so that compulsory motor vehicle insurance would have a single insurer model. The proposal is now that, where an AV causes a crash in automated mode, the victim (driver, passenger or other person) would have a direct right of recovery against the motor insurer and the motor insurer, in turn, would have a right of recovery against the responsible party to the extent there is a liability under existing laws, including product liability laws. The government hopes this single insurer model will encourage consumer confidence and the adoption of AVT, and

Highway Code-the government proposed guidance on Highway Code rules concerning traditional driving requirements (avoiding distraction, driving with both hands on the wheel and observing separation distances) and on the Road Vehicles (Construction and Use) Regulations 1986, SI 1986/1078 (position of the driver, switching off the engine of unattended vehicles and prohibitions on the use of handheld mobile devices). These were generally approved in the consultation and the DfT will continue to develop policy in this area and consult on a specific set of regulations

While the government is taking a cautious approach, we at Gowling WLG share concerns within the industry that the focus on near-to-market technology might inhibit the development of future technologies and the adoption of highly and fully automated AVs. In particular, we believe that the DfT ought to set out now the regulatory structure that will apply to the software (algorithms) that will, in effect, control AVs. Our white paper on this topic makes specific recommendations including the creation of a regulatory body to clarify rules and responsibilities now to ensure innovators in the industry can properly plan vehicles and systems for the years to come.

What are the next steps and when can we expect to see proposed legislation?

In relation to the insurance proposals, the government's proposals for reform will be reflected in the Modern Transport Bill.

The Modern Transport Bill was mentioned in the Queen's Speech in May 2016 and there have been a number of consultations since then, including this one related to ADAS and AVs. The Bill is not yet before Parliament but is generally expected to be published in early 2017.

In relation to the changes not requiring primary legislation (Highway Code and the Road Vehicles (Construction and Use)

Regulations 1986) the DfT is proposing to consult on the specific amendment proposals although no timetable is yet set.

What are the particular challenges of driverless cars faced by the UK motor vehicle insurance model and how can these be overcome?

In some countries the motor insurance model is to attach insurance to the vehicle itself but in the UK the motor insurance model is based on insuring the driver of the vehicle. So, what happens when the vehicle is capable of driving itself and has an accident during automated mode? Although a manufacturer of the AV might be liable to compensate an innocent victim in such a case, there is a worry that compensation would not be quick because:

there would be no clear route to compensation

it might not be clear who controlled the car

innocent third parties might not be covered

drivers might also be outside of the coverage

The DfT proposal is to supplement the compulsory motor insurance (RTA 1988, Pt VI) to include the use of AVs, and establish a single insurer model, where an insurer covers both the driver's use of the vehicle and the AVT. That way the driver is covered both when they are driving and when they have activated the autonomous features.

In this model the insurer is, in effect, taking on the liability which would have been the responsibility of the manufacturer.

Consequently the insurer will have a right of recovery against the manufacturer. The DfT hopes that the relationship between the insurance and the manufacturer communities will rapidly mature and that, with multiple incidents and enhanced data capture in accidents, the attribution of liability will be quickly resolved between insurer and manufacturer.

There was, however, some resistance on the part of manufacturers to this single insurance model and a view that existing product liability law is sufficient.

There is a genuine belief that AVs will deliver safety benefits but those benefits will not be gained if there is low take-up of AVT. It is important to clarify the liability regime in order to bolster public confidence in AVs and specifically in ensuring that members of the public do not feel that the introduction of AVs will put them in greater danger or cut off legitimate routes to compensation. In the UK in 2015, human error was involved in 85.7% of all reported road incidents-the safety dividend in removing human error from such incidents would be enormous and the DfT is fulfilling its function in ensuring that the legal infrastructure supports a move towards AVs and a safer environment.

How could the Highway Code and the Road Vehicles (Construction and Use) Regulations 1986 be affected by driverless cars?

In this area the proposals are much more specific.

Highway Code:

rule 150-updating this rule that requires that drivers 'MUST exercise proper control of your vehicle at all times'. This will need to reflect, in the short term, motorway assist and remote control parking and, in due course, systems that allow the driver to be out-of-the-loop

rule 160-the requirement to 'drive with both hands on the wheel' will need attention for the same reasons

rule 126-this sets down a minimum distance between vehicles by reference to at least a two-second gap.

This will require updating to allow for platooning technology in which the gaps between vehicles are likely to be much less than two seconds. A majority of respondents to the consultation were against immediate amendment and the DfT has now proposed a series of controlled platooning trials in the near future to inform its thinking in this area

Road Vehicles (Construction and Use) Regulations 1986:

the DfT is not aware of any regulations prohibiting the use of motorway assist systems as they require the driver to remain in-the-loop

reg 104 requires a driver to be in a position to have full control of the vehicle and full view of the road and traffic ahead-clarification would be given here to control by hand-held device without being in the driver's seat

reg 107 requires a driver to switch off the engine when not attending the vehicle-again, attendance could be via a hand-held device

reg 109 requires that a driver must not be in a position to see a television set or similar. Views were sought on relaxing this either for specific users or on the adoption of AV technology. A large number of respondents including safety groups thought that this regulation should not be amended at this time

reg 110 prohibits the use of hand-held mobile communications devices while driving-the DfT has proposed to amend this to allow remote control parking via a hand-held device

What concerns have been identified regarding a data sharing framework?

It is clear that AVs and the infrastructure that supports AVs will develop and use a great deal of data. We have issued a white paper on this topic to address some of the concerns around privacy and commercialisation of that data. The regulatory infrastructure will need to be updated to reflect a wider view of essential sharing than is currently contemplated by the EU General Data Protection Regulation (GDPR) in order to ensure that vehicles, people and the infrastructure can communicate effectively without an inordinate number of consent notices.

The government has recognised that there may need to be some specific regulations made in relation to connected AVs and it is developing evidence around this area. It is also participating in international groups, recognising that there will need to be a transnational approach taken to data protection.

Are there any other important points to note from this consultation?

Yes. In the course of the consultation, other points were raised:

there was some appetite to review the whole of the compulsory motor insurance framework. Although not taken up at this stage, we believe that change in ownership models and the introduction of Mobility as a Service (known under the acronym 'MaaS') will put a lot of pressure on the existing and proposed insurance models. That is particularly so if individual owners and individual drivers are not a significant feature then vehicle fleets might become self-insured by large operators in the absence of owner-drivers

no provision was made in the consultation paper for employer liability but the DfT stated that it would liaise with other parts of government to clarify

the DfT suggested that it would maintain a register identifying vehicles with AVT features and that register would form the basis for the single insurance model

cycling groups and motorcycling groups were also keen to ensure that the regulatory programme took into account the needs of vulnerable road users-the DfT agreed

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

]]> 2017-02-07T00:00:00.000-05:0042f2ae2e-8318-4419-8550-cbf6ade8cf81In the second of Motor Finance’s two pieces on the FCA’s review on early arrears management in unsecured lending, Greg Standing, partner and head of the retail and finance automotive sector group at Gowling WLG, outlines the key report’s primary findings

In December, the FCA published its Thematic Report on Early Arrears Management in Unsecured Lending, following its review on how firms engaged with customers in arrears, what forbearance options were offered, and what outcomes this led to. The key findings are:

Consumer credit lenders have improved the way they deal with customers in arrears to achieve fair outcomes.

Overall, most firms comply with the majority of the requirements under the Consumer Credit Sourcebook, although there were some specific breaches.

Retail banks and credit card providers generally more effectively comply with the rules and achieve fair outcomes for customers, with retail finance and online personal loan providers having some of the worst practices.

Repayment (forbearance) solutions offered to customers vary quite significantly in terms of short to long-term solutions, as do firms' intentions towards helping customers whether by looking at affordable repayment solutions, ending the agreement, or collecting payment as soon as possible.

A small number of firms have a culture explicitly and strongly focused on achieving fair outcomes for customers, and offer and deliver forbearance effectively, leading to reduced complaints levels and greater staff job satisfaction.

Just under two-thirds of firms have good intentions to achieve fair outcomes for customers and were making significant improvements, but were still implementing policies and approaches which they were failing to apply effectively and consistently, meaning it took longer for customers to get to an appropriate solution.

About a third of firms have a less customer-centric culture and fail to give due consideration to customers' circumstances leading to poor customer outcomes, including emotional distress.

Most firms miss early opportunities to identify and offer appropriate forbearance to customers in financial difficulty, leading to additional collections activity, and fees and charges to customers' accounts which under the firms' policies would not be added if they had identified the customers' circumstances earlier.

There is much ongoing change prompted by the start of FCA regulation, much of it positive and reflecting a clearer awareness in firms of the interests and needs of customers in arrears, but with much change only being recently implemented and still bedding in.

The FCA has given feedback to the firms involved in its review so they can review their practices. The FCA states that it has seen a lot of good practice in the industry when dealing with customers in early arrears, but there's room for significant improvement in some areas. It expects firms to promote, embed and enforce the right culture to ensure the primary objective of doing the right thing for the market and consumers.

This article originally appeared in Motor Finance in January 2017.

]]> 2017-01-30T00:00:00.000-05:00cf87db0a-5153-4f4a-8b64-e03e2879ccb1The outcome of the UK’s EU referendum has certainly created a degree of uncertainty among US automotive businesses, with almost half (45%) being concerned about the negative impact of potentially protracted negotiations on their organisation. However, our research shows most are adopting a 'wait and see' approach, with the overwhelming majority making no changes to their investment strategy.

In the immediate aftermath of the Brexit vote, the outcome of the Nissan negotiations was an important PR victory for the UK automotive industry. While we do not know the details of the government's negotiations with Nissan, it was particularly helpful in promoting the 'open for business' message. However, it remains to be seen how the next wave of vehicle production decisions go with other manufacturers - a favourable outcome is vital in supporting the long-term health of the UK's established automotive supply chain.

In the lead up to the referendum, the automotive sector in the UK was enjoying a period of good health with manufacturing and sales figures from the Society of Motor Manufacturers & Traders (SMMT) showing a steady, upward trajectory. However, with a heavy reliance on export sales, there is a need for strong and continued support from the government to ensure the sector doesn't catch a cold in the midst of uncertainty.

There are two main issues the sector is looking for clarity on:

The UK's place in the Customs Union and Potential Tariffs

The UK's automotive supply chain is integrated throughout Europe, with components being assembled across multiple borders. If UK-based supply chain companies are to retain their significant role in this process and trade seamlessly across Europe, the Customs Union must remain intact. Similarly, a positive outcome on tariffs is required if the UK automotive sector is to remain competitive.

Free Movement of Labour

The sector relies heavily on a diverse workforce, drawn from many EU countries. A strong skills base is crucial for the future growth and development of the UK's automotive industry and there needs to be clarification on what a post-Brexit environment will look like in terms of building a viable workforce.

Looking Ahead

Despite these uncertainties, the current strength and innovation seen in the UK's automotive sector puts it in a strong position to weather a period of uncertainty. There is also a willingness among international brands with a strong presence in the UK to preserve the status quo. For example, the Japanese were quick to make contact with the UK to outline how they would like to move forward once the UK leave the EU. So far we can be encouraged by the UK's government's support for the sector, but this must be backed up with decisive action to preserve both manufacturing and the thriving export market.

Stuart Young, partner at Gowling WLG and Head of the Automotive Sector.

The following graphs highlight how US businesses with a turnover of $13 million or above are already reacting and preparing for Brexit.

Do you think the delay of up to two years (or possibly longer) for the UK to negotiate an exit from the EU will have a negative impact on your business?

Is uncertainty about the future regulatory environment affecting decisions you are making about trade and investment with the UK right now?

Are you more likely to bypass the UK in order to do business with the rest of the EU as a result of the Brexit vote?

Would you favour a direct trade deal between the US and UK?

Other than a change to tariffs, what factors would encourage you to continue trading and/or investing/providing services into the UK following Brexit?

]]> 2017-01-11T07:00:46.000-05:006555a73e-e917-47b9-8b27-a3c0be9c718fProfessor David Bailey considers what ‘Brexit’ means for the UK’s car industry.

"Death by a thousand cuts" is the risk faced by the UK automotive industry after the Brexit vote, if car firms start investing in other countries rather than the UK. That's what Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said in recent evidence to a Lords' Committee. It's a view I share - if the UK doesn't get things 'right' when it leaves the EU.

Nissan's decision to invest in building the next generation Qashqai model at Sunderland was, of course, great news and reflects the underlying competitiveness of the UK car industry. The Qashqai is the UK's most-produced model, and it's that success that the UK needs to build on.

But bigger battles in securing investment lie ahead - at Honda, Toyota and Vauxhall, all more at risk of switching production to Europe if uncertainties over trading relationships aren't clarified sooner rather than later.

There's particular concern over the possible effects of tariff barriers. With thin margins in the mass volume sector, a 'hard Brexit' that falls back on World Trade Organisation (WTO) rules could see tariffs as high as 10% for cars and 4% for components, which would be hugely damaging. But car-makers and component suppliers also fear non-tariff barriers (things like regulatory differences) as components can cross European borders several times before going into modules like drivelines for final car assembly.

As Hawes noted: "Non-tariff barriers could be as punitive in cost as the tariff barriers. Anything that creates delay creates cost."

All of which brings us back to Nissan and the Qashqai 'assurances' it received. Nissan was going to make its decision in early 2017, but appeared to have pulled this forward to maximise leverage on the government after the Brexit vote and uncertainty over future EU trading relationships.

The government knew it couldn't afford to lose the investment and Nissan effectively held a big gun to its head. So what exactly was offered to Nissan, and what does it tell us about the government's new industrial strategy and, more broadly, its Brexit negotiating stance?
On this we've learned a little from the business secretary Greg Clark. Speaking to Andrew Marr's TV show recently, Clark made it clear that a key UK objective will be avoiding EU tariff barriers.

Clark also made repeated references to industry sectors and their different needs, implying that the UK would seek to negotiate sector-by-sector deals. That could see the UK trying to avoid non-tariff barriers in certain sectors like automotive, effectively giving those sectors something like access to the Single Market.

All of which suggests the government at least sees access to the EU's Single Market as a key negotiating objective. Quite whether Liam Fox, the international trade secretary, agrees with that is another matter, of course.

Clark's revealing interview raised a number of points which the government had previously been pretty vague about. First, Clark seems to be implying that - as a minimum - the UK could remain in a 'customs union' with the EU, which goes a long way to reassuring the automotive industry on tariffs.

Second, if the UK really does want to trade without tariffs and non-tariff barriers, then the EU may well extract a 'price' via a contribution to the EU budget, as made by Norway and Switzerland.

Third, some form of 'referee' may be needed to determine whether the UK's playing by the rules of whatever trade deal is agreed - possibly the WTO or an EU-linked body.

Fourth, despite Nissan wanting 'compensation' if tariffs are imposed, Clark suggested that may not be possible under WTO rules.

Finally, the government appears to have reiterated its support of the car industry through the industrial strategy it's now developing, on issues like skills, innovation and reshoring the supply chain. The latter is welcome, and something of a major U-turn compared with the reign of previous business secretary Sajid Javid, who saw a range of key policy interventions like the Manufacturing Advisory Service axed.

These need to be put back in place - maybe in a more 'place-based' regional approach - if the government's serious about rebuilding fractured supply chains. But let's be clear that staying in the Single Market is still seen as key by many in the automotive industry if the UK's to secure future investment.

That means the Brexit vote still leaves considerable uncertainty over the UK's EU trading relationship, which has the potential to impact on foreign investment in the UK, especially when car firms are replacing models.

Plants and jobs could be at risk if that uncertainty isn't quickly 'nailed down' by clear parameters for a trade deal - preferably one that's as close as possible to existing Single Market arrangements.

]]> 2017-01-10T00:00:00.000-05:00c6bbb3c6-5bf7-48d3-9c98-4aef59d8ed5aThe FCA has issued a booklet - and launched a webcast - to assist consumer credit firms in assessing the adequacy of financial crime systems and controls.

It provides a high-level guide to financial crime for firms for which the FCA is responsible for supervising, and sets out examples of good and poor practice for businesses under the Money Laundering Regulations 2007 (MLRs), as relevant to consumer credit businesses. It also provides guidance to firms on steps to reduce financial crime risk. High-level guidance is provided on the following points along with some pertinent self-assessment questions:

Risk assessment: Requirements must be proportionate to the nature and scale of the firm's activities and the way in which transactions are conducted. Have the main financial crime risks been identified and is the risk assessment up to date?

Policies and procedures must be up to date, appropriate to the business, readily accessible, effective and understood by all staff. What steps are in place to ensure that staff understand policies and procedures and how to report a suspicious transaction?

Governance: Senior management must be aware of the financial crime risks to the firm and actively engage in the approach taken to the risk. How are senior management kept up to date on financial crime issues?

Staff awareness: Staff must have the necessary knowledge to carry out their functions effectively. Is there access to training on an appropriate range of financial crime risks?

Data security: Policies and appropriate systems and controls must be in place to ensure customer data is kept safe. Importantly, how are suppliers of outsourced services monitored to ensure they treat customer data appropriately?

Customer due diligence must be undertaken so that the customer, and its beneficial owner where applicable, is identified and the identity verified. How are issues that are flagged up in the process followed up and resolved?

Enhanced due diligence must be carried out where there is a higher risk of money laundering. What involvement do senior management or committees have in approving high-risk customers?

Ongoing monitoring and suspicious activity reporting: Transactions must be scrutinised to ensure they are consistent with what a firm knows about the customer. How are transactions monitored to spot potential money laundering? How are unusual transactions reviewed and how does a firm decide whether behaviour really is suspicious?

Record keeping: Evidence of a client's identity must be kept for five years after the business relationship ends. The same period applies for transactional documents. Can records be retrieved promptly in response to a regulatory or law enforcement request?

To be best placed to prove the adequacy of their financial crime system and controls firms should have: appropriate, continuous risk assessments; clear written policies and procedures which are applied consistently and effectively and are regularly reviewed and updated; clear allocation of responsibilities; senior management that demonstrates leadership in relation to the financial crime risks to the business; and staff that understand the issues and their roles.

This article originally appeared in Motor Finance in December 2016.

]]> 2016-12-19T00:00:00.000-05:005ee3a266-3e88-47ca-99fc-602a203134f3This article, written by Professor David Bailey, originally appeared in The Birmingham Mail on 29 November 2016.

Jaguar Land Rover's chief executive, Dr Ralf Speth, has set out a vision for producing electric vehicles (EVS) that will see 10,000 new jobs created in the West Midlands.

And, possibly for the first time publicly, he confirmed JLR’s goal of doubling production from 500,000 to one million cars a year. That could create thousands more jobs at the firm and in the supply chain.

It’s an exciting vision of how both the firm and the industry needs to transform over the next decade.

But there’s a catch. The news wasn’t actually an announcement of a plan as such, rather an ‘aspiration’ of where the firm would like to go if the government provides the right support through a supportive industrial strategy.

The firm said it will need help in terms of land, infrastructure, power supplies - key for the energy intensive process of making batteries - and skills.

The timing was critical. Nissan had just held a big gun to the head of the government over the location of the next generation Qashqai in the wake of Brexit-induced uncertainty and a deal was struck to secure that investment in the UK.

Quite what deal was done with Nissan is not clear - and interestingly the Treasury has refused to tell the OBR if any contingent liabilities arise from that deal.

Perhaps not surprisingly, though, the government announced £390m of funding for EV development in the Autumn Statement. Nissan is the biggest producer of EVs in the UK by far.

And now JLR is spelling out what support it needs to make a huge investment in EV research and development, battery making and actual EV production.

The JLR boss was clear on the ambition: “we want to build our EVs in the West Midlands, in the home of our design and engineering. This is clear, it goes without saying. But there is a huge problem - we don’t currently have the capacity to produce them at scale nor at speed, the costs of doing business in the UK are high compared to other countries, and alongside the access to the right skills, energy infrastructure remains the single greatest challenge to Jaguar Land Rover.”

Speth added that JLR needs the equivalent of an extra 12 to 15 gigawatts of electricity per year and the “right legislative framework” to develop its EV plans, and for the wider sector to prosper in the UK.

The firm unveiled its first EV concept car, the Jaguar I- PACE at the LA Motor Show recently.

Speth warned that the UK will lose investment to other countries, such as Germany, if the government did not act: “this is a race ladies and gentlemen, it’s really a race and either we win or we lose. The government must be the enabler.

The government aims to set out its new industrial strategy by the end of the year and JLR has effectively told the government to step up to the plate.

The early signs look promising to a degree. Greg Clark, the business, energy and industrial strategy secretary, stated that making Britain a hub for next-generation EVs will be at the heart of the government’s new industrial strategy.

Clark said that EVs, driverless cars and battery storage will be an “emblematic area of focus... one of the big features of the world and Britain’s industrial policy during the weeks, months and years ahead”.

“The pace of this is quickening all the time and so is our commitment to it. This is a big moment, for a hugely important combination of sectors technologies and institutions.

JLR’s shift into EVs - subject to government support – highlights how quickly the car industry and perceptions of EVs are changing.

In fact, Jaguar is a latecomer to the EV party. Tesla, Nissan, Renault and BMW have all made significant investment in EVs and more are following; witness VW and Toyota now getting in on the act.

VW of course needs to clean up its act in the wake of the self-induced ‘dieselgate’ scandal and hopes that 25% of VW sales will be EVs by 2025.

EV sales currently represent less than 1% of the European market. So far EVs haven’t taken off in a big way partly because of the upfront costs and relatively poor consumer perception. I am confident that will change, however (by the way, I’ve driven one for several years - they work).

Legislation is also forcing manufacturers to lower their fleets’ average tailpipe emissions, making EVs a key imperative for JLR and others in meeting new regulations – whether in the EU or California. Meanwhile Tesla has taken a chunk of the premium market with its up-market EVs.

At the same time, improvements in batteries (higher density, better range) and better charging infrastructure are helping to assuage range anxiety for drivers.

Low running costs, aided by tax breaks, have helped to offset the high price of EVs for early adopters, and as battery costs fall so will EV prices.

We’ll see a lot of new mass market EVs in 2017 with significantly greater range, like the Tesla Model 3, the Chevrolet Bolt, as well as models from Renault and Nissan. They will be game-changers.

In fact, we are about to see the first wave of viable electric cars that can compete in the mass market. And as battery prices come down then by the mid-2020s there will be a tipping point when EVs are likely to outcompete the internal combustion engine.

Like other car firms, JLR will have to make a huge investment in EVs and driverless cars over the next decade. The question for government is whether it wants that investment here in the UK or elsewhere.

An industrial strategy that provides long term commitment on EVs could help underpin huge private sector investment that would bring both a green dividend and new jobs in research, development, assembly and the supply chain.

There’s a big opportunity here for the region and the UK. The government needs to grasp it.

Professor David Bailey works at the Aston Business School.

]]> 2016-12-12T04:50:52.000-05:001d6b0860-1920-4fbf-8f5b-2865fb439171This article, written by Professor David Bailey, was originally published on The Conversation on 8 December 2016

Diesel engines are seen as major contributors to air pollution in cities, as they exude nitrogen dioxide and tiny particulates. These pollutants have a known impact on human health: they can cause heart attacks, breathing difficulties and even premature death.

These measures are likely to increase pressure on other nations - including the UK - to phase out diesel vehicles, or at least introduce clean air zones. London's ultra-low emissions zone, for example, aims to stop the dirtiest diesels driving through the centre of the city. The question now is whether this will be tightened up further and whether other UK cities such as Birmingham and Manchester will act to reduce air pollution too.

In the wake of the VW scandal we should see tougher testing of emissions and fuel efficiency by regulators which better reflects real-world driving conditions. If this requires diesel-powered cars to be fitted with systems that clean up their emissions, they may become more expensive. This would, in turn, affect their popularity.

It's as well that European nations are taking firm action to curb the use of diesel vehicles. For years now, diesels have been pushed by European manufacturers and governments as a supposedly clean alternative to petrol cars, producing lower tail-pipe CO₂ emissions and offering better fuel efficiency. Diesel car sales account for just short of 50% of the European car market, in stark contrast to other major markets where diesel sales are tiny.

For example, in the UK, company cars (which account for about half of annual car sales) have a "benefit-in-kind” tax for drivers, related to the car's CO₂ rating, which makes diesels more attractive from a tax point of view. As a result, diesel sales in the UK have grown dramatically in recent years. European governments have effectively subsidised diesels and, in doing so, have slowed a much-needed transition to cleaner vehicles.

Playing catch-up

Fortunately, a range of hybrids and electric vehicles (EVs) have been developed to meet this need. Japanese and American car makers have gone down two different technological routes. Japanese car makers - and Toyota in particular - went down the petrol hybrid route, while US firms such as General Motors and Tesla have gone into pure electrics and plug-in hybrids.

Toyota is trying to play catch up on EV development while Jaguar Land Rover also recently announced a belated electric push with its I-PACE launch. Meanwhile, VW is trying to clean up its act in the hope that 25% of VW sales will be EVs by 2025.

This is partly down to huge over-hyping early on: despite several years of high expectations for EVs, it's only now that the first genuinely viable models have appeared on the market in the form of the BMW i3, Nissan Leaf 2 and Tesla Model S.

Other factors slowing the take-up of electric vehicles could include a lack of confidence in electric vehicle technology and performance, uncertainty over the lifespan of expensive batteries, a lack of awareness of the incentives that make electric vehicles cheap to run and a relative lack of choice, which results in the perception that electric vehicles are not particularly stylish.

Yet we can be hopeful that these attitudes will change. We'll see a lot of new mass market EVs in 2017, with significantly greater range. Models such as the Tesla Model 3, the Chevrolet Bolt, as well as designs from Renault and Nissan, will be game-changers.

Let's be clear. Diesels should be restricted in cities to improve air quality. Policy needs to favour public transport, as well as alternative car technologies such as hybrids and EVs. Viable models are already here; it's time for governments to start encouraging and supporting citizens to use them.

]]> 2016-12-12T00:00:00.000-05:00d642b4b3-d634-45d5-ab7f-226ee3345afbThis week, in a statement to the US highways regulator, Apple has confirmed that it is working on technology for a self-driving car.

In the statement, Apple talks about the 'significant societal benefits of automated vehicles', but also urges the regulator to continue 'thoughtful exploration of the ethical issues' of self-driving cars. 'Because automated vehicles promise such a broad and deep human impact, companies should consider the ethical dimensions of them in comparably broad and deep terms,' it said.

"The moral algorithm", which launches today, discusses on what basis the industry can programme a set of moral values into a driverless vehicle and urges for regulation that creates parameters for these preferences to work within.

Featuring input from leading experts across the automotive industry, the white paper offers a series of eight recommendations, including the creation of an independent regulator to balance the legality, safety and commerciality issues surrounding autonomous vehicles.

With automotive technology significantly outpacing regulation, the programming and testing of self-driving vehicles need to run in parallel with the development of industry-wide regulation to minimise harm to both man and machine and encourage industry growth.

With that in mind, this white paper is the second in a series which will cover many of the most interesting and significant developments within the dynamic automotive sector, including liability, infrastructure and connectivity.

I hope you find it a useful and thought-provoking read. If you have any queries or comments, don't hesitate to get in touch.